Straight from the Specialists
(Any opinions expressed here are those of the author and not of Thomson Reuters)
Finance Minister P. Chidambaram went more by economic considerations than political ones in manoeuvring his pre-election budget, the focus being on fiscal consolidation with an eye on rating agencies.
The 2014/15 interim budget did not have any new populist measures. The minister may have been convinced that such gimmicks just before elections do not yield votes. Also, there was hardly any time to effectively roll out a new scheme.
The long-term policy target Chidambaram had set himself was to reduce the budget deficit to 3 percent of GDP. This is necessary to bring about price stability, reduce government borrowing, prevent overcrowding in the market and leave more financial resources with the private sector for investment. Although the budget engineering was on these lines, the way deficit has been restrained would not amount to fiscal consolidation.
For the current year, the deficit has been reduced to 4.6 percent from the budgeted 4.8 percent. This was possible in spite of an excess 49 billion rupees of non-Plan expenditure, which admittedly was not much in a 15.9 trillion rupee budget.